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U.S. Stocks Finish Lower Friday, but Hold On to Weekly Gains

James Hyerczyk
After a strong rally at mid-week, following the mid-term elections that resulted in a split Congress, the markets sputtered into Friday’s close. The catalysts behind the selling pressure were weaker crude oil, disappointing data out of China and a hawkish U.S. Federal Reserve.

The major U.S. stock indexes closed lower on Friday as concerns over a global economic slowdown encouraged investors who bought earlier in the week to trim positions and take profits ahead of the week-end. Nonetheless, the indexes still posted solid gains for the week with the bulk of the move attributed to favorable mid-term election results and positive comments from President Trump over working with the Democrats to keep the economy growing.

In the cash market, the benchmark S&P 500 Index settled at 2781.01, down 25.82 or -0.92%. The blue chip Dow Jones Industrial Average finished at 25989.30, down 201.92 or -0.77% and the tech-based NASDAQ Composite closed at 7407.91, down 122.97 or -1.63%.

Consumer discretionary and technology shares weighed on the S&P 500 Index. The Dow was driven lower by Caterpillar and Goldman Sachs. However, losses were softened by gains from Disney. The NASDAQ was pressured by weakness in Facebook, Amazon, Netflix and Alphabet.

After a strong rally at mid-week, following the mid-term elections that resulted in a split Congress, the markets sputtered into Friday’s close. The catalysts behind the selling pressure were weaker crude oil, disappointing data out of China and a hawkish U.S. Federal Reserve.

Sellers also reacted to comments from White House trade advisor Peter Navarro who nixed the idea of a possible solution to the trade dispute. “If there is a deal – if and when there is a deal, it will be on President Trump’s terms. Not Wall Street’s terms,” he said.

U.S. Treasury Markets

U.S. Treasury yields fell on Friday in reaction to the previous day’s Fed decision to leave rates unchanged and a stronger-than-expected monthly producer inflation report. Safe-haven buying tied to weaker equity markets also drove yields lower.

On Thursday, the Fed held rates steady, while issuing a hawkish monetary policy statement. The news helped drive the 2-year rate to its highest level since June 2008, but yields backed away from this high on Friday.

The U.S. producer price index posted its largest monthly gain since September 2012 during the month of October, the Labor Department said Friday.

U.S. Dollar Index

Despite the lower Treasury yields, the U.S. Dollar rose toward a 16-month high against a basket of currencies in reaction to the hawkish Fed decisions and a weaker Euro.

The Fed stands ready to raise rates for a fourth time this year in December. The market is also supporting this notion with traders’ expectations at 75.8 percent, compared to 71.1 percent on Thursday, according to the CME Group’s FedWatch tool.

The Euro continued to weaken in reaction to the simmering dispute between the European Union and the Italian government. The single currency retreated after the European Commission forecast that the Italian economy would grow more slowly than Rome thinks in the next two years, leading to much bigger budget deficits than assumed by the government.

This article was originally posted on FX Empire

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